This excerpt taken from the ELN 6-K filed Mar 31, 2008.
Analysis of Results of Operations by Segment
For analysis of our product revenue and contract revenue by segment, refer to pages 39 to 41 of the Financial Review.
Cost of Sales
Cost of sales increased 2% to $69.1 million in 2007 from $67.6 million in 2006. Included within cost of sales were other charges of $3.1 million (2006: $Nil), as described below. Excluding other charges, the gross margin on revenue was 71% in 2007, as
44 Elan Corporation, plc 2007 Annual Report
compared to 73% in the same period 2006. The decrease in the gross profit margin was principally due to the change in the mix of product sales and reduced selling price of Maxipime as a result of a generic competitor.
Selling, General and Administrative Expenses
SG&A expense increased 47% to $553.2 million in 2007 from $377.0 million in 2006. Included within SG&A expense were other charges of $289.0 million (2006: $5.6 million other credits), as described below. Excluding other charges, SG&A expense decreased 31% to $264.2 million from $382.6 million in 2006. The decrease primarily reflects lower net SG&A expenses recorded in relation to Tysabri, as described on page 41, and the restructuring of our commercial infrastructure related to the approval of a generic form of Maxipime in June 2007 and the anticipated approval of a generic form of Azactam, along with reduced amortisation expense following the impairment of our Maxipime and Azactam intangible assets, which resulted in the reduction of related selling and administrative costs.
Research and Development Expenses
R&D expense increased 24% to $223.3 million in 2007 from $180.1 million in 2006. Included within R&D expense was other charges of $10.2 million (2006: $9.9 million), as described below. Excluding other charges, R&D expense increased 25% to $213.1 million in 2007, compared to $170.2 million in 2006. The increase was primarily due to increased expenses associated with the progression of our Alzheimers disease programmes and particularly the advance of AAB-001 into Phase 3 clinical trials and the advance of ELND005 into Phase 2 clinical trials during 2007. R&D expenses for 2007 included $39.3 million (2006: $31.5 million) in relation to Tysabri.